WARRANTIES
PREPARED BY: MS. NORAZIMAH MAZLAN
INTRODUCTION
• Since parties in marine insurance are free to
contract on terms and conditions, the interpretation
on the terms of the contract is essential.
• In a contract of marine insurance, a warranty has a
significant effect. A warranty is promissory in nature.
• The non-fulfillment of warranty will automatically
discharge the insurer from liability, from the date of
breach.
WHAT IS WARRANTY?
• Condition on which the contract is founded.
• With a warranty, the assured undertakes that
certain obligations need to be complied with,
within a certain period of time.
• The liability of the insurer, under the insurance
contract depends on the assured’s compliance
with these obligations.
• Thus, warranties are used by the insurer as a
shield against liability.
The warranties incorporated into the
contract play an essential role in assessing
the risk.
E.g. a warranty to the effect that the insured
vessel will not navigate in a certain areas
gives an idea to the insurer about the extent
of risk he has agreed to provide cover for.
• S. 33(1) MIA 1906:
A warranty means a promissory warranty, that is to
say, a warranty by which the assured undertakes that
some particular thing shall or shall not be done, or
that some condition shall be fulfilled, or whereby he
affirms or negatives the existence of a particular state
of facts.
DEFINITION UNDER S. 33(3) MIA
The assured :
i) either undertakes that some particular thing shall or
shall not be done
e.g:
“Warranted that Captain Nash shall be the captain of
the voyage”
“Warranted that the vessel shall not carry mining
timber as cargo”
ii) or undertakes that some condition shall be fulfilled
e.g.
“Warranted that the vessel shall be surveyed by 1st
July 2015”
iii) or affirms or negatives the existence of a particular
state of facts
e.g.
“Warranted that the yacht is registered in Norway.”
“warrants that the flag of the insured vessel has always
been British”
NATURE OF WARRANTY
1. It must be exactly complied with
2. It need not be material to the risk
3. There is no remedy for breach
4. There is no defence for breach
1. It must be exactly complied with
(s. 33(3) MIA
De Hahn v Hartley
• There was a warranty in the
policy requiring the insured vessel
to sail with at least 50 crew members.
•
The vessel sailed with 46 and 6 more joined
shortly afterwards.
HELD : the warranty was breached.
2. It need not be material /have
connection to the risk.
s. 33(3) MIA
It is distinguished /different from nondisclosure and misrepresentation.
It must be exactly complied with whether it
be material to the risk or not.
Duty of disclosure
Only material
circumstance need to
be disclosed
Duty of abstaining
Material circumstance
from misrepresentation need to be
represented correctly.
Warranty
The promise need to
be complied with
whether it is material to
the risk or not.
Yorkshire Insurance Co. Ltd. v. Campbell
[1917] AC 218
• The insurance policy was on a horse,
which was going to be carried in a
vessel.
• The assured when describing the horse warranted
that the horse was 5 years and had a certain
pedigree.
• During the voyage, the horse died for natural
reasons. It was later found out that the horse had a
different pedigree than the one expressed by the
assured.
• Held : the warranty was breached and the
insurer was entitled to deny liability.
3. There is no remedy for breach
 Once a warranty has been breached, it is irrelevant
whether the warranty is later complied with.
Quebec Marine Insurance Co v Commercial Bank of
Canada.
• There was an implied warranty of seawothiness.
• The boilers of the vessel was defective from the
beginning of the voyage.
• The repair was later done, soon after resuming her
voyage.
• The vessel encountered severe weather and was lost.
HELD: The implied warranty has been breached. The
insurers were not liable even though the defect was
remedied before the loss occurred.
4. There is no defence for breach
 Any non-compliance for whatever cause or
reason, would constitute a breach.
 There are only 2 grounds that will excuse the
breach:
 By reason of change of circumstances
 When compliance with the warranty is
rendered unlawful by any subsequent law.
 The innocent of the assured is immaterial.
Douglas v Scougal
Lord Eldon: It is not necessary to inquire
whether the owners acted honestly and fairly
in the transactions.
Even though the assured was mistaken in the
fact that the vessel is in fact, unseaworthy,
the underwriter is not liable.
LEGAL EFFECT OF A BREACH OF
WARRANTY
• Section 33(3)A warranty, as above defined, is a condition which
must be exactly complied with, whether it be
material to the risk or not. If it be not so complied
with, then, subject to any express provision in the
policy, the insurer is discharged from liability as from
the date of the breach of warranty, but without
prejudice to any liability incurred by him before that
date.
s. 33(3)- the insurer is discharged from liability as
from the date of the breach of warranty.
The Good Luck: Lord Goff- the insurer is
automatically discharged from liability. It is not
dependent upon any decision by the insurer.
No damages for breach of warranty. For
example, insurer is unable to sue assured for
damages to reimburse expenses incurred in
investigating a claim which insurer is not liable.
FORMS OF WARRANTY
Express warranty
Implied warranty
EXPRESS WARRANTY
 S. 35(1) MIA 1906:
An express warranty must be incorporated into
the contract of insurance by means of written
words.
 S. 35(2)
An express warranty must be included into the
policy or in any documents that are incorporated
into the policy.
Thus, oral statements during negotiations are not
warranties unless the statements are then
incorporated in writing into the policy.
Example of Express Warranty
Clause 1.1 Institute Time Clauses Hulls
……..it is warranted that the vessel shall not
be towed, except as is customary or to the
first safe port or place when in need of
assistance, or undertake towage or salvage
services under a contract previously
arranged by the Assured and/or Owners
and/or Charterers.
 This clause denies cover in the event of
the insured vessel being towed except
customary towage.
IMPLIED WARRANTY
 Implied warranties are incorporated into certain
marine policies by the MIA 1906, and their scope
and number is determined by the Act.
 It is presumed to apply without having to express it
in the contract.
 In the MIA, there are 4 implied warranty:
 The implied warranty of portworthiness (s. 39(2)
MIA)
 The implied warranty of seaworthiness (s.39 (1),
(3), (4) MIA)
 The implies warranty of cargoworthiness s. 40(2)
 The implied warranty of legality (s.41 MIA)
Implied Warranty of Portworthiness
 It means the ship is reasonably fit to encounter
ordinary perils of the port.
 The degree of fitness to encounter ordinary
perils of the port may vary according to
different factors.
 The class of the vessel in question can be quite
crucial in determining degree of fitness.
e.g. A cargoship can be considered as
portworthy for a specific port but a pleasure
port may not.
Implied Warranty of Seaworthiness
 In a voyage policy, there is an implied warranty
that at the commencement of the voyage, the
ship shall be seaworthy.
 Seaworthiness means the vesssel is reasonably
fit in all aspects to encounter the ‘ordinary
perils’ of the intended voyage.
 This includes :
 the physical condition of the ship,
 adequacy of the crew, and
 having documents required to be carried
on board ships.
 If the vessel is unseaworthy, the insurer is not
liable for any loss or damage, eventhough the
loss was not caused by unseaworthiness of the
ship.
Implied Warranty of Cargoworthiness
Cargoworthiness means the vessel is
reasonably fit to carry goods or other
moveables to their destination.
In order to be considered cargoworthy, a ship
must also be equipped to carry the particular
kind of cargo that she has contracted to
carry.
e.g. If the cargo is frozen meat, the
refrigerating machinery, holds, etc must be
in proper order and efficient to carry that
particular cargo.
If the cargo is grain in bulk, the vessel must
be supplied with sufficient separation cloths
and adequate shifting boards.
Sleigh v Tyser
A vessel carying livestock must have
sufficient ventilation and stockmen to care
for the cargo.
Implied Warranty of Legality
 The subject matter insured (e.g. ship, freight,
cargo) and the adventure insured must be
lawful.